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OECD report questions mega-boxship rationale

Vessel size not as important as engine efficiency and modus operandi, claims OECD-linked International Transport Forum

A new study on mega-boxships questions whether bigger actually is better in container shipping.

Boxships have doubled in size over the past decade but a report by the International Transport Forum (ITF) questions whether it is still worth it.

The Organisation for Economic Co-operation and Development (OECD)-affiliated think tank asks whether a tipping point has been reached where further increases in size will result in disproportionally higher port and hinterland costs.

It suggests that the annualised transport costs related to mega-boxships amounts to around $400m in additional outgoings linked to equipment, dredging and port infrastructure costs.

Bigger vessels would require more expenditure, so while a new generation of 24,000-teu ships could be developed, such increases may not necessarily be desirable.

“The potential cost savings to carriers appear to be fairly marginal but infrastructure upsizing costs could be phenomenal,” the ITF wrote in its study titled “The Impact of Mega-Ships”.

The report challenges the assumption that mega-ships — which it defines as vessels over 13,000 teu — are the primary reason for decreasing transport costs. Approximately 60% of the cost savings of the most recent boxships are related to more efficient engines and not to scale. It estimates that costs have reduced by around one-third over a decade in which ship sizes have doubled but the rate at which savings are made is up to six time less than during a previous round of upsizing. Meanwhile, the massive ordering of newbuildings will dampen some of the cost savings, as low demand results in fewer savings per transported container.

One key finding of the study relates to the additional cost to other parts of the transport chain required by mega-ships. The current generation could be expanded to 22,000 teu, through design modifications such as adding a top layer or additional container row. Beyond that, a new generation of vessels of 24,000 teu would be needed to obtain sufficient cost reductions but further expansion would come at too great a cost.

“[The] introduction of 100 24,000-teu ships in 2020 would require substantial investments in those places where these ships would be first introduced [Far East, North Europe, Mediterranean] but would also — via cascading effects — result in the introduction of 19,000-teu ships in North America and 14,000-teu ships in South America and Africa. This would imply additional investment requirements there as well,” the study said.

It concedes that 19,000-teu vessels offer significant savings over those of 15,000 teu but estimates that at least 55% to 63% of the savings are attributable to optimisation for slow steaming.